Is "the rich getting richer" a problem?

[Chark]

kaneada said:

There is one part of this argument that really doesn't make sense to me, so help me out here. The rich, no doubt, invest money into stocks and bonds, and that money is in turn turned into loans that are often taken by the middle class; but if the middle class debt to income ratio is high (which is the case in America) then it doesn't matter how much money there is to loan to the middle class. Loans will get rejected based on this.

With that being said, there is nothing wrong with some wealth being distributed as loans in this system, it is one way that middle class prospers, but this does not help the overall economy, which there is data that indicates that the average wealthy person spends in the same range on services and goods as the average middle class consumer. When you consider that gains for the wealthy have raised steadily and substatially over the last 30 years, and wages for the middle class have stagnated over that same period of time, a problem with the current implementation of trickle down economics starts to show its flaws. A job that paid 45K in 1980 only pays marginally better today while if the rate of increase that existed in the 1970's held true then that job would pay around 94k a year, which would maintain with the rate of inflation.)

The point I'm making is not that rich shouldn't get richer, and its not that the rich don't invest in the middle class, its that they are not investing evenly. Placing money in stocks and bonds, does invest money into companies which could be used for job creation; however, if consumer demand is low why would that company create jobs that only hurt their bottom line? That would be a waste of invested money. Instead if those investments were placed into employee salaries, then the middle class that would profit from that would be able to invest in loans, services, and goods, which would in turn spark comany growth, job creation, and higher bottom lines for these companies.

 

To answer that I would suggest an area leading to this situation is the lack of support in our education system. More people than ever before are entering college and a degree has never been as important in the workforce than it is today. Even so, education has been the scapegoat target of governmental spending effectively leading to regressive taxation through the elimination of benefits.

Let me explain, the typcial college student is entering a stage in their life when they become self dependant and financially self-reliant. With the reduction of education spending that cost now exists where it previously did not. While one can simply choose not to attend college, the inherent need is built in. Some students have the benefit of parental support to cover tuition but those costs are mearly being transferred over to the middle income families, as the lower income students despite receiving more funding through grants retain the costs in the form of debt, creating a economic group with negative net worth. This creates problems with the loaning system and loans are not within reach to many that are educated and willing to start businesses. 

Essentially maintaining a tax system that shifts the rich gets richer effect down the economic scale encourages growth, while keeping the bar high leads to stagnation and debt. Providing cheap, affordable, and perhaps free eduction allows for more opportunity for individuals. It is far more important that we fund that with our tax dollars than it is to have them be used as a welfare system that simply lets those we've left behind through mismanagement survive. We can't reduce wealfare if we are keeping everyone in the poor house.